Welcome to the June edition of Neudata’s Tidbits for Data Providers.

This month we highlight new guidance on alternative data from US regulators, outline SIGTech’s study on data outsourcing among quant funds, and share data buyer trends.

THE SEC RELEASES GUIDANCE ON ALTERNATIVE DATA

In 2020, the US Securities and Exchange Commission (SEC) added alternative data to its list of examination priorities. Fast forward to 2022 and the regulator has released guidance to buy-side firms on how they should document their usage of alternative data within investment processes.

At the end of April, the SEC published a risk alert that showed some funds were:

• Not managing the data vendor onboarding process in a diligent manner
• Not properly documenting their diligencing efforts through written policies, particularly with respect to what would happen if a fund received or used material non-public information (MNPI)
• Not properly documenting red flags in data sources
• Not implementing systems that would determine when a vendor needed to be re-diligenced

The risk alert has given data buyers another reminder of the importance of good due diligence practices – we would expect many firms to create more written documentation around their data sources, which could lead to an increase in the amount of information that buyers request from you.

In fact, we’ve recently observed an increased amount of interest in Neudata-listed DDQs, with many hedge funds and asset managers asking for updated DDQs from vendors they currently buy data from or wish to buy data from in the future.

If you are a data vendor who has yet to submit a DDQ, please reach out to research@neudata.co to receive your unique link

HEDGE FUNDS ARE OUTSOURCING THEIR DATA SERVICES

A recent study by SIGTech — which surveyed quant fund managers — found that 79% of fund managers plan to outsource their data to third-party data services.

The main problems cited were the lack of in-house subject specialism and the shortage of skills required to clean and process data. The study revealed 94% of respondents found it difficult to negotiate with data vendors and assess data to make sure it met required standards for ingestion during the investment process. Almost 72% of fund managers found it challenging to find data that is cleaned and authenticated.

In order to overcome these problems, quant funds are planning to increase their budget when sourcing and managing data.

This is good news for data sellers, as it shows the demand of alternative data and associated management tools could increase in upcoming years. Therefore, data vendors should try to make their data more quant-friendly if funds are the targeted audience. For example, mapping datasets to tickers and/or providing both cleaned and raw data could potentially make the data more appealing to this audience.

WHAT ARE DATA BUYERS ASKING FOR?

In the past month, we have observed interest for data in the following sectors:

• TV viewership across streaming platforms,
• Automobile activity, and
• Supply chain data tracking the cycle of commodities.

If you are a data vendor that sources these types of data, we would advise you to create a Neudata data provider account, where you can share your product details with our buy-side clients. Please reach out to saima@neudata.co to create your account.

PEOPLE MOVES

Make sure you check out our people moves section, which recaps the latest job moves in the alternative data industry. If you want us to recap your new job or latest promotion, get in touch with Sondra at sondra@neudata.co.

26 May: Second Measure, Earnest Research, Point72 and more
19 May: J O Hambro, Yipit, Vatic and more
5 May: Two Sigma, Man Group and more

Until next time,

Saima

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